Asian market open
Sorry bit late, forgot to post the Asian market open which you can read here by clicking through to FX Street.
Looks like some EUR/AUD selling going through
Like The Guru just mentioned, macro hedge funds are buying AUD/USD and I suspect that they might be selling EUR/AUD through the legs as EUR/USD has dipped by 25 pips in this period.
Hugely important technical resistance close by in the cross and a weekly close below 1.4400 might encourage some big profit taking.
The Guru playing AUD/USD from long side this morning
The Guru is a senior interbank dealer for a major international bank based in Asia and he specialises in day-trading. He's been generally playing the AUD from the short side over the last few sessions but he is playing it from the long side today, noting that macro hedge funds have been buying back shorts already this morning. You can follow him on Twitter, protected access, https://twitter.com/fxww303.
He's long near .9200 looking for .9235/40.
Cable: Building a small long-term long position for 1.75+
I've come up with one of my long-term 'wacky' trade ideas which came about as I was doing all my analysis this morning. I've had a look at EUR/USD and EUR/AUD, EUR/GBP and AUD/USD, Gold, USD/JPY and EUR/JPY. After all of this, I came to the conclusion that the big 'risk' trade in the market is for cable to go a lot higher.
On these long-term plays, its impossible to simply pick a level and say it will go higher from here. Had I done exactly the same broad analysis earlier this week I would have reached exactly the same conclusion but I could have been going long at 1.5750 and watched it fall 300 pips! So generally speaking I will pick a wide 600 pip range and attempt to build my strategic position inside of this range.
The frustrating thing with these types of ideas is not getting it wrong; I do that all the time and can easily budget for any losses. The real frustration is when my analysis is correct but the market starts moving hard in my direction and I don't get a chance to build a reasonable position. Then I watch a market move 20+ big figures and I have a 1 or 2 lot position rather than a 10 or 20 lot position. Big big difference.
The last time I had a similar idea was in EUR/AUD near 1.2350/1.2400 and that did develop into a very nice little earner. I could have run it further of course but no point in being greedy (or?). Time frame on this is months instead of days. so only for the hard core position traders.
EUR/AUD: Very important technical levels nearby
Keep an eye on the weekly chart (see chart) as a weekly close clearly above 1.4400 would be a very bullish event. There were a series of 3 major weekly highs providing a capping line and the first one of these came in near 1.4400.
There may be some stops above there and we could get a false spike but its the weekly close which I would pay most attention to.
AUD/USD: Speculators selling, and selling, and selling
Prime broker reports show that leveraged accounts were piling into AUD/USD shorts again yesterday with the compelling story of risk-off global sentiment, renewed USD bullishness, falling commodity prices and a sharp Chinese credit squeeze. Based on this back-drop it makes sense to be short AUD/USD.
But don't forget that these are the same players who were limit long at 1.0500 based on exactly opposing fundamentals.
I had to reduce my long position last night as the risk was becoming a bit high but I will increase again at the slightest hint of a short-term technical bottom forming. I will reduce again below .9150 and accept the market's wisdom.
USD/JPY: Trendline resistance holds overnight
If in doubt, have a look at the technical picture an old mentor of mine used to say. The 4-hour chart is showing that prices tested exactly the bearish trendline from 103.80 through 102.50 (see chart). There was a 5-wave downmove from 103.80 to 93.80 and the fact that it retraced around 40% is also a moderately bearish signal. Offsetting this of course is the longer-term bull trend.
Any post-FOMC euphoria for USD/JPY is mis-conceived in my view. If the Fed starts withdrawing its stimuli, the world economy will suffer, and FX risk trades will be hit. I can understand USD bulls getting revved up about the AUD/USD to some extent, but not in USD/JPY or USD/CHF. I've got a small short USD/JPY position from overnight with a stop now above .9870.
USD keeps on rising
Hedge funds continue to buy the USD across the board and there is little point in getting in the way. My stop in the AUD/USD has been triggered and the move lower today has been absolutely relentless. USD/JPY is settling back above 98.00 and the dollar bulls have complete control of this market.
I find it best not to try and regain losses immediately, that usually goes pear-shaped as well, so I'll just watch proceedings from the benches for now.
AUD/USD: Latest bids filled and it still looks heavy. USD/JPY nearing technical resistance.
Despite the solid demand from the BIS, the AUD/USD is still looking heavy. I've added to my long position below .9230 and I'm hoping that technical support in AUD/USD at .9220 and technical resistance in USD/JPY at 97.60 will be enough to repels those persistent USD bulls.
One slight positive for the AUD is that AUD/JPY is poking its nose back above .90.00.
AUD/USD: Central banks buying in recent trade
Thanks to FXWW888 for the insight that Sovereign names have been buying AUD/USD near .9240 in recent trade whilst FXWW303 tells us that hedge funds are still selling through some of the bigger investment banks. We are spoilt for information.
I'm still long and have more bids at .9225 but I will reduce drastically below .9190.
Goldies still leaning on AUD/USD
Goldman Sachs are being reported as the main AUD seller this afternoon, most likely some big hedge fund using the name as part of the prime brokerage agreement.
Market sentiment turning very USD-bullish
The market is always right and it's bullish at the moment. USD/JPY is above 97.00 and eyeing technical resistance at 97.60 whilst the AUD/USD is getting too comfortable below .9250 for my liking. Still think I'm right though! Doesn't every trader?
Chinese funding squeeze also weighing on the AUD
Our hedge fund insider https://twitter.com/FXWW888 is reporting that short-term Repo rates are up 375bps at 12% and this is definitely a serious serious squeeze. This is naturally weighing on AUD sentiment as well. Not sure why the PBOC hasn't eased the situation but maybe they are taking the heavy sledge hammer to property speculation.
AUD/USD testing .9250 after lower China PMI data; major support .9218
The big technical support level to watch is the 61.8% retracement of the major up-move from .8060 to 1.1060. That comes in at .9218.
Market now focusing on events in emerging markets
The logic in the market is that any contraction in quantitative easing by the Federal Reserve will cause a flood of funds back to the US from international asset markets. If this starts to happen, it will obviously be bullish for USD/AXY (Asian currencies excepting the Yen). The FX market is treating the AUD/USD as a proxy for this trading idea, hence the big sell-off. Keep an eye on events in regional equity and debt markets for indicators of what's likely to happen next.
AUD/USD: Initial resistance at .9325/30
The AUD/USD fell by 300 pips in the 4-hour period immediately after the FOMC and you can make up your own mind on whether this was warranted or not. I am still very strongly of the view that AUD/USD will form a major base somewhere around .9200/50 and I'm positioned accordingly. Initial resistance starts at the prior lows near .9325 and above there is the 38.2% retracement of last night's collapse which comes in at .9375.
EUR/AUD: Strong resistance near 1.4350
Have a look at the weekly chart and you will see a line of 3 highs across from 1.4350 which will provide some solid resistance.